Use the Following to Answer Questions 26-28

question 65

Multiple Choice

Use the following to answer questions 26-28:
Table 12.16
-(Table 12.16) The payoffs represent profits in thousands of dollars. Suppose that two firms are playing an infinitely repeated game. In period 6, Firm B decides it will no longer cooperate with Firm A. If Firm A is using a grim trigger strategy, Firm A will choose:

• A) a low price in period 7 and all future periods.
• B) a low price in period 7 and a high price in all future periods.
• C) to set price below marginal cost and drive Firm B out of the market.
• D) to maintain a high price in all future periods.

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Definitions:

Allowance for Doubtful Accounts

A reserve for accounts receivable that a company does not expect to collect in full, acknowledging some customers may not pay their debts.

Allowance for Doubtful Accounts

A contra-asset account used to create an estimated reserve for debts that may not be collected.

Bad Debts Expense

An expense reported on the income statement, representing the estimated amount of credit sales that are not expected to be collected.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that may not be collectible.